iTA: what to expect over the next 12 months

iTA: What to Expect Over the Next 12 Months

Date: April 20, 2026 | Category: Prospective Analysis | Reading Time: 10 min

Provisional Application Is Underway

Since May 1, 2026, the Interim Trade Agreement (iTA) between the European Union and MERCOSUR has entered into provisional application. This step, often underestimated, is in reality the true starting point for concrete changes affecting businesses. Unlike the comprehensive association agreement, which requires ratification by all national parliaments, the iTA produces immediate legal effects on the trade pillar. The first tariff reductions are now effective, and a precise timeline is taking shape for the twelve months ahead.

This article offers a structured prospective analysis of what lies ahead for European and EFTA businesses between May 2026 and May 2027.

Phase 1: May - August 2026 — First Tangible Effects

The opening weeks of provisional application are marked by the immediate entry into force of certain tariff reductions. From May 1, customs duties on a first category of industrial products (machine tools, precision equipment, certain chemicals) have been reduced according to the dismantlement schedule set out in Annex I of the iTA.

For businesses, this initial phase is one of operational adaptation. Customs authorities on both sides of the Atlantic are implementing new origin certification procedures. Customs declarations must now incorporate the iTA's preferential codes, and authorised economic operators benefit from simplified procedures.

During this period, the EU-MERCOSUR joint technical committees are meeting for the first time to clarify the modalities for applying rules of origin and tariff-rate quotas. These meetings, while technical, are decisive: they establish the interpretations that will guide customs administrations for years to come.

Phase 2: September - December 2026 — Acceleration

From September 2026, a second wave of tariff reductions enters into force. This phase notably concerns the automotive sector (first tranche of the 35% duty reduction), pharmaceuticals and technical textiles. For the European agri-food sector, the first reduced-duty quotas for cheeses, wines and spirits begin to be utilised.

It is also during this period that the European Parliament is expected to vote on ratification of the comprehensive association agreement. The vote, anticipated in Q4 2026, will be a major political moment. A favourable outcome would consolidate the iTA's momentum and send a strong signal to investors.

Meanwhile, businesses that anticipated the changes will begin to see the first competitiveness gains. European exporters to Brazil and Argentina, in particular, will see their margins improve thanks to lower entry duties.

Phase 3: January - May 2027 — Consolidation

The first quarter of 2027 marks the consolidation of the new trade regime. Economic operators now have six months of practical experience with the new procedures. The first interpretive disputes over rules of origin will have been resolved by the joint committees, creating valuable administrative case law.

This is also the period when annual tariff-rate quotas are renewed. Businesses that did not use their quotas in 2026 will need to adjust their strategy for 2027. Unused volumes are not carried over, creating pressure to utilise preferences quickly.

On the MERCOSUR side, Brazil and Argentina should have finalised their own ratification processes for the comprehensive agreement. Uruguay and Paraguay, traditionally faster in their parliamentary procedures, will likely have already ratified.

Sectoral Windows of Opportunity

Each sector has its own liberalisation timeline. Here are the main windows to watch.

Automotive and parts: The first reduction tranche (from 35% to approximately 30%) applies from May 2026. Full dismantlement will span 15 years, but the initial reductions are already enough to shift the competitive equation against Asian manufacturers present in MERCOSUR.

Machinery and industrial equipment: Accelerated reduction over 7 years. Swiss and German companies, leaders in this segment, benefit from an immediate competitive advantage. Duties drop from 14-20% to 10-15% in the first year.

Chemicals and pharmaceuticals: 10-year schedule with significant reductions from the first phase. Basel-based companies and European laboratories can now plan market entry or expansion strategies in MERCOSUR.

Agri-food: Reduced-duty quotas for cheeses (notably PDOs), wines and spirits are operational from May 2026. The protection of over 350 European geographical indications provides a solid legal framework for producers.

Services and public procurement: The opening of MERCOSUR public procurement to European businesses is being implemented progressively. The first tender procedures open to European bidders are expected in H2 2026.

Risks to Anticipate

Every trade transition carries risks. The complexity of rules of origin remains the primary operational challenge. Businesses with value chains fragmented across multiple countries will need to verify that their products meet the sufficient transformation criteria defined by the iTA.

Currency fluctuations between the euro, Swiss franc, Brazilian real and Argentine peso can attenuate or amplify tariff gains. A hedging strategy is recommended for medium-term contracts.

Political instability in certain MERCOSUR countries could slow the implementation of certain provisions. Businesses should factor this into their risk analysis.

Finally, the interplay between the iTA and the EU Deforestation Regulation (EUDR), set to apply from June 2026, creates a dual regulatory challenge for importers of agricultural products from MERCOSUR.

What Businesses Should Do Now

The next twelve months represent a decisive window for action. Audit your value chain to verify compliance with origin criteria. Train your customs teams on new certification procedures. Map relevant tariff-rate quotas and plan their utilisation. Monitor joint committees whose decisions directly impact rule interpretation. Assess public procurement opportunities that are progressively opening to European bidders.

Businesses that position themselves now will enjoy a significant first-mover advantage. Those that wait risk seeing their competitors gain ground in a market of over 270 million consumers.

*This article is published by MTH Publishing. The information provided is for informational purposes only and does not constitute legal advice.*